J.P. Morgan's Profits Up on Lending Boost -- Update
J.P. Morgan Chase & Co. said its third-quarter profit rose 7.1% as a boost from lending offset weaker trading results for the nation's biggest bank by assets.
Shares slipped 0.4% premarket, even as earnings and revenue beat expectations.
The bank reported a profit of $6.73 billion, or $1.76 a share. That compares with a profit of $6.29 billion, or $1.58 a share, in the same period of 2016. Analysts polled by Thomson Reuters had expected earnings of $1.65 a share.
Revenue rose 2.7% to $26.2 billion. Analysts had expected $25.23 billion.
Investors will next turn to the bank's earnings call Thursday morning to find out whether Chief Executive James Dimon or Chief Financial Officer Marianne Lake will shed light on topics ranging from the bank's trading revenue, which could foreshadow results across Wall Street, and further views on long-awaited regulatory changes from the Trump administration.
The boost from still low -- but rising -- interest rates will also likely be a major focus, as an increase in rates can help the profitability of big consumer lenders like J.P. Morgan. Sharp moves in the yield of the 10-year Treasury in the third quarter had whipsawed bank shares.
Rates have risen this year as the Federal Reserve has increased its short-term target. But the 10-year hasn't risen as much, leading to a flattening of the yield curve, which can hamper bank profits.
J.P. Morgan's trading revenue decreased 21% to $4.53 billion from $5.75 billion a year earlier. Mr. Dimon said at a September banking conference that trading revenue was likely to fall around 20% in the third quarter compared with the year-earlier period, but predicted that volatile markets -- ripe for trading -- would return.
Costs decreased to $14.32 billion from $14.46 billion a year earlier. Executives said in a February investor presentation that expenses are expected to rise in 2017 to fund investments and growth.
Legal costs totaled a benefit of $148 million in the third quarter, compared with a cost of $16 million in the second quarter and a gain of $85 million in a year earlier.
Return on equity, a measure of profitability, was 11% in the third quarter compared with 10% a year ago.
J.P. Morgan, run by Chief Executive James Dimon, is one of two banks, along with Citigroup Inc., kicking off third-quarter earnings season for U.S. financial institutions. The two large banks offer investors a snapshot of a quarter that analysts expect will be characterized by softer loan growth and trading headwinds. Also, with expected regulatory loosening not yet resulting in definitive changes, U.S. interest rates continue to be one of the biggest drivers for bank results later in 2017.
Since the election, J.P. Morgan's shares are up 38%, alongside a 34% jump in the KBW Nasdaq index of bank stocks.
Though bank stocks have been fairly flat in the months following the postelection surge, they came roaring back toward the end of the third quarter, in part due to investor optimism around a tax-code overhaul.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
October 12, 2017 07:30 ET (11:30 GMT)